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July 13, 2019 - Freedomain Radio - Stefan Molyneux
11:47
Dead Dollar Walking: The Truth About Government Debt
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Hi everybody, this is Stefan Moll and Comfida Main Radio.
I hope you're doing well.
As I've been saying for six or seven years, there will be no economic recovery.
Please prepare yourselves accordingly with the latest data from 2014.
This is the truth about government debt.
So at the start of the financial crisis in 2007, worldwide global government debt stood at around 70 trillion dollars.
Now, a little over a half decade later, The amount of global government debt has increased 40% to over $100 trillion.
During that time, the outstanding United States government debt has soared to a record $17.5 trillion.
And recently, former Senior Economist for the President's Council of Economic Advisors, Lawrence Kotlikoff, reported that when accounting for unfunded liabilities, U.S.
debt exceeds $205 Trillion dollars right so there's deficit which is the amount of money the government can't pay this year There's the debt which is the accumulation of deficit deficits And then there is the unfunded liabilities which are all the promises that governments have made to future recipients that they do not have the money for.
So this is pretty staggering.
It's a staggering increase in the amount of debt.
Now, of course, the government says, and this is governments all around the world, but in particular the US says, "Well, we had to spend that money, you see, "because we needed to create jobs, "we needed financial relief to struggling families, "we need to rebuild local infrastructure, "invest in small businesses, and so on." Yes, well, where is that money really going?
Are you seeing much of it?
Are you seeing much economic recovery?
Well, no.
So, there's this Federal Reserve policy.
The Federal Reserve, of course, is a quasi-private institution that creates money out of thin air, which the politicians then use to bribe special interest groups by selling off the unborn fetuses of the next generation to foreign banksters.
And the Federal Reserve has been creating massive amounts of money.
Now they keep changing the name so that you think that the crime is different.
In the past it used to be called money creation, inflating the money supply, and before that it was called counterfeiting.
Now they call it quantitative easing.
And this creation of Crazy fiat currency in the American economic system has been referred to as the greatest backdoor Wall Street bailout of all time.
The Federal Reserve purchases assets with this money that it creates out of nothing from private banks at inflated prices, props up the price of their assets on paper.
A lot of major financial institutions in the United States are technically insolvent, but they get to pretend they have more money than they do because the Federal Reserve is buying up their crappy assets at inflated prices, making them look a little bit better on paper and pretending that the whole house of cards is somehow staying up.
It all would have fallen, right?
So in Iceland, where they have to be a little bit more rational because it's really cold and nobody really wants to live there, so they have to make it economically more inviting.
This is why warm countries tend to be the most corrupt, because you'll put out the trap to get decent weather and insects the size of biplanes.
In Iceland, they basically, when the financial institutions were fraudulent and corrupt and went heavily into debt, over-leveraged and went bankrupt, Iceland said, the Icelandic government said, oh, go pound sand, forget it, you're going to go out of business.
Oh, and by the way, we're going to prosecute you for fraud, which is something conspicuously absent in the U.S.
As a result, the Icelandic economy is doing very, very well.
Billionaire hedge fund manager Stanley Druckenmiller in 2013 says, this is fantastic for every rich person.
This is the biggest redistribution of wealth from the middle class and the poor to the rich.
Ever!
Ever!
And this counts war.
So, income disparities, as you're probably aware, have been widening considerably in the United States, and whenever income disparities widen, the economy tends to do poorly for a variety of reasons, and this is another reason why things aren't going to get better anytime soon.
According to economist Steve Keen, this is the biggest transfer of wealth in history, as the giant banks Have handed their toxic debts from fraudulent activities to the countries and their people, right?
So this is like going to the casino.
You get to keep all your winnings and all of your losses are handed off to other people.
Well, it doesn't take a gambling genius to make money in that situation.
Robert D. Auerbach, an economist with the U.S.
House of Representatives Financial Services Committee, reported that although the Federal Reserve has distributed over $2.2 trillion between August 2008 and June 2013, 81.5% of that money that is created to supposedly stimulate the economy now sits idle as private banks' excess reserve.
So, the Federal Reserve is creating money, using it to buy up toxic assets from banks that would otherwise be insolvent, and the banks are just sitting on the money.
They're not required to hold these excess reserves.
In fact, since 1959, the excess reserves at banks have stayed at approximately zero, because why would they leave money sitting around when they should be out there investing in businesses and people and loaning money and, you know, greasing up economic activity?
Why are they doing that?
Well, because the Federal Reserve is paying them to do it, because as of 2008, the Federal Reserve says, oh, we'll pay interest on these Excess reserves.
We'll pay interest on whatever money you don't put into the economy.
And we'll get into the why of that in a moment.
Most of the Fed's new money issues of $65 billion a month is added to these excess reserves.
Why are they holding all these excess reserves?
Well, the Federal Reserve started paying risk-free interest on those reserves, and they are discouraging The banks from lending to Main Street, right?
Because if all of that money that they're creating through the Federal Reserve makes its way into the economy as a whole, inflation is going to explode.
I mean, inflation is going up.
But we're talking like Weimar-style hyperinflation, wheelbarrow of money to buy a loaf of bread potential for Zimbabwe, supernova of the currency inflation.
A lot of the people who are skeptical of Austrian economics are saying, well, the Fed is printing all this money.
Why is there no hyperinflation?
Well, because it's getting stuck up in the banks.
Fed's giving the money to the banks and then paying the banks not to invest it in Main Street.
So, Federal Reserve creating $65 billion out of thin air each month to buy assets from large private banks and then pays them billions of dollars of interest on this new money when it's placed in excess reserves.
Banks have $2.6 trillion in these excess reserves and are paid a quarter of a percentage point interest by the Fed.
That's an additional $6.5 billion annual subsidy from the general public to the private banks.
Of course, the Federal Reserve doesn't really have any capacity to make money anymore than the government does as a whole, so this is all debt.
So, this fundamentally, what has been occurring over the past six or seven years, is not a financial crisis.
It's a bank robbery.
Profits are being privatized and losses are being socialized.
This is the too big to fail.
Why are banks swallowing up smaller banks?
Because smaller banks cannot compete with banks deemed too large to fail that are almost certainly guaranteed to get government bailouts.
Now, what's going to happen when all this new money leaves the excess reserves and enters the available money supply?
Massive, massive inflation.
Let's see where the American government is sitting at right now.
President Obama's 2015 budget proposal continued to paint a troubling picture, to put it mildly.
Budget deficit shrinks to $564 billion from $649 billion this year.
And this is assuming that we take with any credibility the made-up magic pixie leprechaun unicorn numbers that come out of the ass of the government economists.
So if you were $17,500 in debt, you cut your overspending by $85 and aimed to only be $18,064 in debt by the end of the next year, what would people say about your financial advisor?
Well, he's smoking something he probably shouldn't, but in the US budgetary world, this is described as sound economic policy.
By 2017, U.S.
taxpayers will be paying more in interest on the debt than on the budget for Medicaid.
By 2020, U.S.
taxpayers will be paying more in interest on the debt than they would on the entire defense budget.
This is with 700-plus military bases around the world.
So what does this mean?
Let's break it down to person.
$17.5 trillion in debt.
Not even the unfunded liabilities, just the debt.
$55,750 for every American.
$1,750 for every American or $121,982 for every employed American, even counting those who are clogging up the bureaucratic arteries of the government.
By 2024, the total national debt would rise from $17.5 trillion to nearly $25 trillion, even using the government's own numbers.
It's going to be worse than that.
$25 trillion in debt amounts to almost $80,000 for every American, or almost $175,000 for every employed American.
I don't know about you, but when I check under my couch and in the pockets of my old jeans, I don't quite come up with that money.
Maybe you're doing a little better than me in the loose change department.
There's just no way that this debt can possibly be paid off if we include the unfunded liabilities.
Current debt plus unfunded liabilities of $205 trillion.
That amounts to $653,074 for every single American or over $1.4 million in debt for every employed American.
$3,074 for every single American, or over $1.4 million in debt for every employed American.
You understand that this is madness.
And a lot of what the government is doing is just trying to keep the house of cards propped up for just a little bit longer.
They just don't want the dollar to collapse just yet.
They don't want the catastrophe to occur on their watch.
They basically want to scoop as much money out of what remains of the treasury before the giant stone doors of mathematical reality come down.
That which mathematically cannot continue will not continue.
There will be no economic recovery.
I really strongly urge you to prepare yourself accordingly.
Get used to these new realities.
The odds are that the government is going to continue to try and do what Japan has been trying to do for the last 20 plus years, which is to continue to inject fresh healthy blood into the zombie rotted corpse of their existing financial institutions and pretend that they still have an economy.
This is really, really important to understand.
This is not going to work.
And please, please don't talk to me or anyone else about blaming the free market or the death throes of capitalism.
Look, there's only ever a free market when Money is in the hands of the free market.
Money has been taken out of the hands of the free market in America since 1913.
Right?
So a little over a hundred years, government has been in control of the money.
When the government is in control of the money, there's no free market.
There's a few vestiges of the free market, but that's sort of like saying there's free market in the Soviet Union under Stalin because people did work under the table.
There is very little free market left once the money is socialized.
Once the money is socialized, either the money becomes privatized or the entire economy, as we're seeing under Obamacare, is going to get socialized too.
So please, please, please don't even think about blaming the free market for this.
Trying to blame the current mess on the free market is like disinterring a 101-year-old corpse and trying to convict it of a current murder.
This is Stefan Molyneux from Free Domain Radio.
Take care, my friends.
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